Employers Cut Back on Aid to Laid-Off Workers

Another perk for having been laid off earlier!

From the Wall St Journal | Aug 9, 2009 By ANNA PRIOR

As
companies continue to lay off workers, here's another reason for people
to worry about joining the ranks of the unemployed: They may find a
smaller severance package than they expect.

The unemployment rate fell to 9.4% last month, but 247,000 jobs were
still lost in that period. And the more people laid off by companies,
the larger the chunk of change being paid out in the form of severance
pay, continued health benefits, retraining and other services. So
companies are beginning to put such payments under the microscope.

Smaller severance packages will add to the financial strain of
laid-off workers. And state unemployment benefits only get you so far.
People who have been jobless for an extended period -- a max of as many
as 79 weeks in some states -- will soon face the end of their state
benefits.

"There
is less money on the table and people are essentially doing the least
that they have to do in terms of taking care of exiting employees,"
says Wendi Lazar, an employment lawyer and partner at Outten &
Golden in New York. "We used to see benefits where companies would pay
for [the continuation of health coverage at group rates under] Cobra or
give the employee six months to a year of health care, and we aren't
seeing that anymore."

Separate surveys of several hundred companies, conducted within the
past few months by consulting firms Mercer and Hewitt Associates, show
that many employers say they don't plan to modify severance policies,
if they have one.

Still, consultants and employment lawyers say anecdotal evidence
suggests that some cuts in severance packages should be expected and
negotiating better terms is becoming harder to do.

Meantime, a few companies have turned to more fundamental changes in
the way they compensate laid-off employees. Media company Gannett, for
instance, is now offering supplemental unemployment benefit plans,
which allow the company to share part of the cost of severance pay with
the states.

On the Chopping Block

Tim Foley

In
this economic environment, the first thing to likely get cut back is
employer-paid continuation of medical benefits, says Ed Rataj, managing
director of compensation consulting at CBIZ Human Capital Services.

Instead of providing benefits such as health insurance for the same
length of time as severance payments, as has traditionally been done,
says Lori Wisper, a senior consultant at Hewitt, some companies are
looking to either share the cost of continued coverage or shift the
full cost of coverage to the former employee. Health benefits under
Cobra typically cost about $400 per month for an individual and more
than $1,000 per month for a family. (A federal subsidy that covers 65%
of Cobra premiums is available for those who have lost or who will lose
their jobs between Sept. 1, 2008 and Dec. 31, 2009.)

There also could be changes to the cash side of a severance package,
usually the most expensive part of a deal, Ms. Wisper says. For
instance, two weeks of pay for every year of service might fall to one
week of pay for every year worked.

In addition, some maximums for how many weeks of severance pay an
employee can receive are shrinking to 26 weeks, from highs of 40 to 52
weeks.

The one area still holding steady, says Mr. Rataj, is outplacement
services -- mostly because it's the cheapest thing to provide.

The amount of services offered tends to vary based on employment
level. People in senior-level positions usually get access to full
services provided by an outplacement firm, such as an office to use
while job hunting, résumé preparation and administrative assistance.
Lower-level employees are typically given résumé preparation and access
to group seminars on job-search skills, says Ms. Wisper.

These services "provide goodwill among employees," says Mr. Rataj. "It can create a good public image at a pretty low cost."

What's Negotiable

Tim Foley

Given
the tighter purse strings, negotiating the terms of a severance package
is becoming an even more awkward dance these days. This is especially
true when a company has widespread layoffs, says Scott Hill, a
financial adviser and senior vice president at Kanaly Trust, a
wealth-management and financial-planning provider in Houston.

In the past, a rank-and-file employee could expect employers to be
open to negotiating higher severance pay, extended health benefits or
compensation for unused vacation days. "An employer would be open to
trying to make it a palatable and amiable exit," Ms. Lazar says.

But now, she says, "a lot of companies are taking a hard line." They say, "this is the package -- take it or leave it."

Still, negotiating isn't a complete waste of time. If you are
leaving a senior-level post, you could have some leeway, especially if
you're asked, as a condition of the package, to sign a noncompetition
agreement or nondisparagement clause.

By signing such an agreement, "you are giving the company something
of value," says Mr. Hill. That means you may be able to squeeze out
something of value for yourself in return.

As for lower-level employees, they should think of things that can
be of value to them, says David Cashdan, an employment lawyer and vice
president of public policy for the National Employment Lawyers
Association.

Some examples: flexibility in choosing an outplacement services
firm, assurance that a person will be placed on a rehire list, a letter
of recommendation and assurance that nothing negative will be said
about the person to a prospective employer.

And if such things don't cost the company a lot of money, that's another plus.

In the end, take your time reviewing any package. Typically,
companies will give you a deadline. But "take no more than half of that
time to come back with some sort of counter proposal, says Mr. Hill,
"because the company will want some time to consider that deal as well."

Also, Ms. Lazar recommends having a lawyer look at the package to
ensure you aren't waiving any rights that could make it difficult for
you to find another job or prevent you from suing the company for an
existing claim.

Write to Anna Prior at anna.prior@wsj.com